Idaho Supreme Court hears cigarette tax case

The Idaho Supreme Court is considering whether Native American retailers that sell cigarettes to other Native American retailers must obtain Idaho state tax stamps.

The high court heard arguments Dec. 3 in the case between Native Wholesale Supply Co., which operates on the Seneca Reservation in New York, and Warpath Inc., which operates on the Coeur d’Alene reservation, the Spokesman-Review (http://bit.ly/WEvSpe ) reported.

Native Wholesale Supply Co. has sold more than 100 million cigarettes to Warpath without complying with Idaho state laws that require payments into a fund created after a national tobacco settlement. The company imports the cigarettes from a native-owned manufacturer in Canada.

The state of Idaho sued the company and tried to fine it more than $214,000 because state officials said the cigarette sales didn’t comply with Idaho law. But attorneys for Native Wholesale Supply Co. say the state doesn’t have jurisdiction — the sales are between tribal members on reservation land — and besides, there’s no evidence the cigarettes ever touched Idaho soil off of the reservation. The Coeur d’Alene Reservation touches the Washington border, the attorneys noted.

“Native Wholesale Supply has never sold to any Idaho consumer,” attorney Samuel Diddle told the justices. The wholesale sales to Warpath “may not be regulated by the state because of tribal sovereignty,” he said.

But Deputy Attorney General Brett DeLange told the justices that Idaho has a very comprehensive set of rules regulating cigarette sales, and one is that cigarettes must be approved for sale before they can be sold.

“Native Wholesale Supply just wants to ignore all that. They don’t want to comply with the state’s efforts of comprehensively regulating cigarette sales in our state,” he said.

Retired Justice Linda Copple-Trout, who is sitting in the case, said there isn’t a limitation on who ultimately ends up with the cigarettes, and that the state has an interest in enforcing its tobacco laws to help cover tobacco-related health care costs.

Justice Joel Horton said his reading of Idaho’s tax stamp law indicates it doesn’t apply to reservation sales.

“If they haven’t made any sales of cigarettes subject to tax, they can’t hold a permit,” Horton said.